Description: Enclosed with No. 1143. In X's view any attempt to impose political systems of Western world on Balkan states would prove disastrous; Hitler, making such attempt, may "get his fingers burned"; Western Europe should limit its interest in this area to economic assistance and development; Bulgaria in strongest position with 80 percent of population engaged in agriculture; industrialization in Rumania too rapid because of high percent of illiteracy; Germany has arranged to buy wheat from these countries at high prices and will pay for it with machinery and manufactured goods; Rumania and Yugoslavia now favorably inclined toward England; X felt that in economic field, Mussolini had been unwise, with expenditure of vast sums on unneeded facilities; X certain Italian people do not want war; he thinks nothing England can do will induce Mussolini to release his grip on Spain; X thought little of Italian Army, but thought Air Force efficient and well equipped; he thought time had arrived when [England] should take firm attitude with Italy, suggesting Ambassador should be recalled; firm action with Mussolini would prove jolt for Hitler and pave way for firmer English policy in dealing with Hitler regime; showed X article by Vernon Bartlett in News Chronicle which suggested projected visit of [Neville] Chamberlain and Lord [Irwin] Halifax [to Rome] early in New Year might not take place; X felt visit inopportune anyway, and thought any such gesture of good will would be misinterpreted as sign of weakness by both dictators; as result of Munich, Germany no longer fears England, and other countries have lost faith in her; Himmler real master of Germany and Ribbentrop powerful because of alignment with Himmler; X said England must recognize she is dealing with gangsters of most depraved type and adapt her dealings with them to this fact; Germany controlled by 100,000 of its worst elements; other than these, most Germans ashamed of Nov. 10 pogrom against Jews; persecution of Jews will continue with greater ferocity and persecution of Christians intensified; then will follow onslaught on capital; Hitler beyond redemption, but in X's view, Mussolini might be won over to side of reason, if England is firm in dealing with him; Hitler no bulwark against Bolshevism as he claims; he is rapidly moving toward destruction of capitalism; X's statement that Hitler had designs on Belgium, Holland, and Switzerland based on information given him by "a man who is in daily contact with Hitler"; X said his position with the Generals more difficult since Munich, but he still had friendly relations with them; X felt if world is to be saved from catastrophy Hitler issue must be determined within next six months.